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TMI Blog1981 (7) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 25,000 should be made under section 40A(3). 2. When the matter went in appeal to the Commissioner (Appeals), he asked the ITO to submit a remand report. In the remand report the ITO admitted that the disallowance under section 40A(3) was really Rs. 40,000 and not Rs. 25,000 as wrongly mentioned by him. The payment in cash to K.B. Enterprises was made as follows: Rs. 27-9-1974 5,000 1-2-1975 20,000 6-2-1975 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o section 40A(3) enables him to rectify the assessment order under section 154(7) of the Act which clearly indicates that the disallowance under section 40A(3) is not to be determined with reference to the year in which the payment is made, but in the year in which the expenditure is incurred. He therefore, urged that the order of the Commissioner (Appeals) should be set aside and that of the ITO restored. The learned counsel for the assessee relied on the order of the Commissioner (Appeals). 4. We have heard the rival submissions. Section 40A(3) reads as follows: "(3) Where the assessee incurs any expenditure in respect of which payment is made, after such date (not being later than the 31st day of March, 1969) as may be specified in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of assessment that cash payment has been made in respect of the expenditure, the substantive provisions of section 40A straightaway permit him to disallow the amount, but in case an assessment has already been made allowing such cash payment and later on the ITO comes to realize that such payment was not allowable, the proviso enables him to rectify the assessment under section 154(7). In any case, the import of section 40A(3) is quite clear that cash payment not coming within the exceptions mentioned in rule 6DD(j) are to be disallowed, and the year of payment has nothing to do with the year in which the disallowance has to be made. The disallowance has to be made in the assessment year in which the expenditure is incurred either und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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